The Destructive Power of Inflation
Argentina’s experience holds two crucial lessons for other countries. First, price stability is fragile, and the inflation rate can rise rapidly. And, second, high rates of inflation remain in the public’s memory and have long-lasting adverse effects.
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CAMBRIDGE – When I was in Argentina last week, I was reminded of the devastating power of high inflation. Argentina’s annual inflation rate is now about 20%, down from an estimated rate of about 40% last year. The central bank is struggling to keep the economy on a disinflationary path, with a goal of achieving a 5% rate three years from now.